EC green lights €453.25M state aid for Azores airline SATA

The European Commission has on Tuesday approved Portuguese state aid to support the restructuring of Azorean airline SATA, amounting to €453.25 million in state loans and guarantees, providing for ‘remedies’ such as a reorganisation of the corporate structure.

“The European Commission has approved, under European Union rules on state aid, Portugal’s plans to grant the airline SATA Air Açores restructuring aid totalling €453.25 million,” a measure that aims to “enable the company to finance its restructuring plan and restore its long-term viability,” the institution said in a statement.

The ‘green light’ announced on Tuesday comes after Portugal notified the European Commission in April 2021 of its intention to grant state aid to support SATA’s restructuring plan for the 2021-2025 period.

The approved sum is divided into direct loans of €144.5 million and debt take-up of €173.8 million, for a total of €318.25 million to be converted into equity, and state guarantees of €135 million granted until 2028 for funding provided by banks and other financial institutions.

“The restructuring plan sets out a package of measures aimed at improving SATA’s operations and schedules, as well as reducing costs,” Brussels highlights in the press information.

It involves commitments “to ensure effective implementation”, such as the divestment of a controlling stake (51%) in Azores Airlines, the split of ground handling activities and a reorganisation of SATA’s corporate structure, with the creation of a holding company that replaces SATA Air Açores in the control of its subsidiary operations.

It also requires SATA to cap its fleet until the end of the restructuring plan and prohibits the purchase of any aircraft until that date.

“The Commission has concluded that the restructuring aid complies with European rules on state aid, namely those concerning rescue aid and aid granted to companies in difficulty, the Commission said.

Specifically, Brussels says it has verified that “the aid is necessary and appropriate to ensure that SATA, being a company in difficulty, will be viable in the long term without the need for continued public support”, that “the negative effects of restructuring aid on the air transport sector are limited” and also that this state support “facilitates the development of regional air transport and related activities, particularly in the Azores tourism sector, and does not distort competition”.

Quoted in the notice, the European Commission’s executive vice-president with responsibility for competition, Margrethe Vestager, points out that this measure “will ensure the territorial continuity of the Azores islands with mainland Portugal and the European Union, while allowing SATA to return to viability”, also highlighting the “safeguards to ensure that possible distortions of competition are limited”.

SATA’s financial difficulties have persisted since at least 2014, when the airline wholly owned by the Azores regional government began to record losses, aggravated by the effects of the Covid-19 pandemic, which had a huge impact on the aviation sector.

Also today, the European Commission announced it had closed the investigation opened in August 2020 into SATA over public support from Portugal, after the company reimbursed the Portuguese state for the money provided for capital increases.